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Economy

Japan antitrust probe to target Amazon, Rakuten and beyond

Online mall operators are suspected of placing unfair burden on vendors

Amazon Japan's reward program is under scrutiny for suspected antitrust practices.

TOKYO -- Japanese antitrust authorities are set to launch a probe into Amazon Japan, Rakuten and Yahoo Japan, all suspected of forcing online vendors into shouldering an unfair burden in rewarding customers through loyalty programs, Nikkei has learned.

The Fair Trade Commission is looking into changes in Amazon Japan's reward program taking effect in late May that would require vendors to shoulder the cost. The regulator will also examine similar systems at Rakuten and Yahoo Japan that are paid for by sellers. Such arrangements essentially cut into vendors' revenue, on top of the fees they already pay to platforms.

The move is part of a broad investigation into big tech companies launched by the regulator in January. Platform providers like Amazon have gained enormous influence as the e-commerce industry has grown, making it vital for the government to find the right balance between encouraging growth and crafting regulation to protect smaller businesses.

Altering contracts without spelling out the direct benefits to sellers, as Amazon Japan has apparently done, may constitute abuse of a superior bargaining position under Japanese antitrust law.

Points programs in particular have generated a number of complaints, a JFTC source said. The regulator will survey sellers and look into business practices at online malls to shed light on these often opaque systems and see whether platform operators are unfairly extracting profits from smaller businesses.

Online mall operators may not be willing to cooperate fully, and sellers that are bound by confidentiality agreements or worried about retaliation may be able to provide only limited information. The JFTC plans to make clear that it is prepared to invoke the Antimonopoly Act, which lets it compel businesses to turn over information on their finances or activities.

Yahoo and Rakuten said Tuesday they would cooperate with the investigation if requested. Amazon Japan declined to comment.

The JFTC plans to look beyond rewards programs as well. Big e-commerce companies are also suspected of using the leverage afforded by their massive customer bases and troves of data to push around small and midsize vendors, demanding excessive price cuts or unilaterally dropping them from platforms.

If e-commerce companies "have excessively increased the burden on sellers through one-sided contract changes, that's a serious problem that distorts the competitive landscape for small and midsize businesses," Economy, Trade and Industry Minister Hiroshige Seko told reporters Tuesday.

In an industry ministry survey last October of 2,000 vendors, including businesses and individuals, a vast majority of respondents expressed dissatisfaction with their dealings with e-commerce companies. The JFTC set up a channel in January to solicit further comments and concerns.

Small and midsize businesses complained about platform operators changing contract terms unilaterally with no opportunity to negotiate, and foisting new fees on them. Such steps could be deemed abuses of dominance if they impose an unfair burden or do not come with a reasonable explanation.

Whether Amazon Japan's rewards program -- which requires vendors to offer points worth at least 1% of customers' purchases -- fits this description is unclear. Some observers argue that a 1% hit to revenue is within the range of day-to-day price fluctuations and should be tolerable. The argument will likely hinge on whether the explanation of the economic rationale behind the change was reasonable.

Amazon Japan says the program will lead to more sales opportunities. But the benefits could prove minimal if the additional sales on Amazon cannibalize sales on other platforms rather than boost overall revenue.

Consent is another tricky question. Small and midsize businesses that rely on e-commerce have little bargaining power, raising questions as to whether they can really freely agree to the terms on offer.

Tokyo is starting to consider concrete measures to regulate platform operators, including steps to prevent excessive concentration of data. A plan to tackle the issue will be incorporated into the government's growth strategy due out this summer.

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